Published: Thursday, January 3, 2013 at 3:30 a.m.

Last Modified: Wednesday, January 2, 2013 at 11:35 p.m.

MONTGOMERY | Lost in the relief over Congress averting the “fiscal cliff” for at least two months is the reality that federal withholding on wages will rise.

The tax fix that President Barack Obama said he will sign will not keep in place the 2 percentage point FICA, or Social Security, reduction from 2010.

“The part of the package that is really not desirable for Alabama is basically one component, specifically the FICA tax,” Auburn University Montgomery economist Keivan Deravi said Wednesday.

Curtis Stewart, tax policy director for the Alabama Department of Revenue, said analysts have not yet determined the financial impact of the 2 percentage point FICA tax increase, an amount that is deductible on state income tax returns.

“It’s going to affect everybody,” said John Parr, a certified public accountant in Gadsden. “If you make $50,000, it’s going to cost you $1,000.”

Every wage earner will see an increase in his or her FICA, or Social Security tax, from 4.2 percent to 6.2 percent. The other side of the coin is that wage earners have benefited from the 2 percentage point reduction for two years.

“It created additional disposable income in the period when we had minimal raises or no increases in personal income,” Deravi said.

U.S. Sen. Richard Shelby, R-Ala., voted against the fiscal cliff legislation, while U.S. Sen. Jeff Sessions, R-Ala., voted for it.

Sessions said the focus should be on reining in “the continued surge in spending.”

U.S. Rep. Terri Sewell of Birmingham, the sole Democrat in Alabama’s congressional delegation, was the only House member to vote for the bill, which she said will help her district.

“While not perfect, the bill is a balanced and measured approach that includes revenues and spending cuts and permanently extends vital tax cuts for the middle class and working families,” she said.

U.S. Rep. Robert Aderholt, R-Haleyville, who represents part of Tuscaloosa County, voted against the Senate-passed bill. “Rather than making serious cuts to federal spending, eliminating loopholes and simplifying the tax code in order to promote job creation and growth, this package instead is another Band-Aid fix that will raise taxes, increase federal spending and future borrowing,” Aderholt said.

Republican Gov. Robert Bentley said. “I would have voted against this agreement because I believe we need a more balanced approach that would include significant spending cuts and making the federal government more efficient, like we’re doing here in Alabama.”

Spokesman Jeremy King said Bentley opposes the measure because it raises $620 billion in taxes without significantly cutting spending. He said Bentley believes “Washington needs to take a more balanced approach that includes a reduction in spending.”

The deal postponed so-called sequester, or spending cuts, for two months. The new Congress that takes office today will have to immediately begin working to “fix” the cuts with new revenue.

The deal was panned and praised by state party chairmen.

“The last-minute deal that was cut between the Obama administration and the Senate leadership is a symptom of a broken Washington, D.C., where they simply ‘kick the can down the road,’ ” said Alabama Republican Party chairman Bill Armistead.

Alabama Democratic Party chairman Mark Kennedy said that despite opposition by Alabama’s GOP congressional delegation “hard-working families and small businesses across Alabama and the country will start out the new year protected from steep tax increases.”

“Thanks to President Obama’s leadership, these hard-working, middle-class families and small-business owners will not face higher tax rates and, as a result, our nation’s economy will continue down the path to recovery,” Kennedy said.

<p>MONTGOMERY | Lost in the relief over Congress averting the “fiscal cliff” for at least two months is the reality that federal withholding on wages will rise.</p><p>The tax fix that President Barack Obama said he will sign will not keep in place the 2 percentage point FICA, or Social Security, reduction from 2010.</p><p>“The part of the package that is really not desirable for Alabama is basically one component, specifically the FICA tax,” Auburn University Montgomery economist Keivan Deravi said Wednesday.</p><p>Curtis Stewart, tax policy director for the Alabama Department of Revenue, said analysts have not yet determined the financial impact of the 2 percentage point FICA tax increase, an amount that is deductible on state income tax returns.</p><p>“It's going to affect everybody,” said John Parr, a certified public accountant in Gadsden. “If you make $50,000, it's going to cost you $1,000.”</p><p>Every wage earner will see an increase in his or her FICA, or Social Security tax, from 4.2 percent to 6.2 percent. The other side of the coin is that wage earners have benefited from the 2 percentage point reduction for two years.</p><p>“It created additional disposable income in the period when we had minimal raises or no increases in personal income,” Deravi said.</p><p>U.S. Sen. Richard Shelby, R-Ala., voted against the fiscal cliff legislation, while U.S. Sen. Jeff Sessions, R-Ala., voted for it.</p><p>“It's a bad deal, mostly about taxes and spending and ultimately borrowing, (with) very little tax cuts,” Shelby said. “We need fundamental tax reform, need to amend our entitlements (because) we are headed down the road Europe's already on.”</p><p>Sessions said the focus should be on reining in “the continued surge in spending.”</p><p>U.S. Rep. Terri Sewell of Birmingham, the sole Democrat in Alabama's congressional delegation, was the only House member to vote for the bill, which she said will help her district.</p><p>“While not perfect, the bill is a balanced and measured approach that includes revenues and spending cuts and permanently extends vital tax cuts for the middle class and working families,” she said.</p><p>U.S. Rep. Robert Aderholt, R-Haleyville, who represents part of Tuscaloosa County, voted against the Senate-passed bill. “Rather than making serious cuts to federal spending, eliminating loopholes and simplifying the tax code in order to promote job creation and growth, this package instead is another Band-Aid fix that will raise taxes, increase federal spending and future borrowing,” Aderholt said.</p><p>Republican Gov. Robert Bentley said. “I would have voted against this agreement because I believe we need a more balanced approach that would include significant spending cuts and making the federal government more efficient, like we're doing here in Alabama.”</p><p>Spokesman Jeremy King said Bentley opposes the measure because it raises $620 billion in taxes without significantly cutting spending. He said Bentley believes “Washington needs to take a more balanced approach that includes a reduction in spending.”</p><p>The deal postponed so-called sequester, or spending cuts, for two months. The new Congress that takes office today will have to immediately begin working to “fix” the cuts with new revenue.</p><p>The deal was panned and praised by state party chairmen.</p><p>“The last-minute deal that was cut between the Obama administration and the Senate leadership is a symptom of a broken Washington, D.C., where they simply 'kick the can down the road,' ” said Alabama Republican Party chairman Bill Armistead.</p><p>Alabama Democratic Party chairman Mark Kennedy said that despite opposition by Alabama's GOP congressional delegation “hard-working families and small businesses across Alabama and the country will start out the new year protected from steep tax increases.”</p><p>“Thanks to President Obama's leadership, these hard-working, middle-class families and small-business owners will not face higher tax rates and, as a result, our nation's economy will continue down the path to recovery,” Kennedy said.</p>